Online tax system to target wealthy savers

MORE than a million wealthy savers preparing to file tax returns in coming weeks will become guinea pigs for the Government’s new “digital tax accounts”, it emerged last night.

Under plans to phase out annual tax returns, the Government wants to give every individual a permanent internet account. Around one in eight of those going online to complete self-assessment forms between now and the January 31 deadline will be used to trial the new system.

Once they enter their passwords and other log-in details they will be redirected to a new website where some of their information – such as income earned through employment – has already been filled in.

The selected taxpayers will typically have more complex affairs and multiple sources of income. Rather than sending in reams of paperwork or using online forms once a year, they will then be encouraged to keep their personal account up-to-date.

HM Revenue & Customs was expected to launch the its digital tax accounts next year, but appears to have brought forward the plans. Last night experts warned it could create chaos.

Elaine Clarke, of audit firm CheapAccounting.co.uk, said: “It’s appalling that HMRC thinks it’s OK to implement this new system without telling anybody.”

Tax officials insist the system will make it easier for taxpayers to keep track of their liabilities and avoid underpayments or overpayments.

Ruth Owen, head of personal tax at HMRC, said the change was “groundbreaking” and compared it to the development of online banking.

Under the change, HMRC’s growing databases will “join up” to “populate digital tax accounts with the information it holds”. The information would include earned income obtained from employers, as well as details of interest earned on savings accounts, which from next year will be passed to HMRC by banks and building societies.

The digital account service will feature an online “webchat” or messaging system to help deal with taxpayers’ queries, to be launched in July 2016.

The project, billed as a way to “end the tax return for millions of taxpayers” will be fully implemented by 2020.